HOW CAN YOU IMPROVE YOUR PROJECT MARGINS IN THE ENERGY INDUSTRY?
Project-based service companies do all kinds of project-related work, such as inspection, testing, installation, modification, maintenance and even decommissioning of their clients’ key assets or facilities. Project service companies charge asset owners for labor, materials and equipment, often through short or long employment contracts. Many project-based service companies also have an extensive leasing business to support a variety of services, in addition to multidisciplinary skills that add to their value proposition in the different markets they sell to.
Some of the challenges faced by project-based service companies include;
Delivery on time and on budget
As each service project is usually individually tendered and calculated, even with some negotiated employment contracts, the responsibility to deliver the projects on time and on budget rests with the project service company. This also provides these companies with very good market opportunities to increase the price in good market conditions as well as reduce prices when competition is tough. It’s all about knowing your cost structures and having an efficient standardized execution model.
Delivery of equipment and resources
Ensure that the delivery of equipment and resources is a critical activity for all project service companies, especially in complex cross-border environments. Facilitating cross-border logistics and material transfer with full visibility and transparency is always critical for in-service projects across cross-border assets.
Additional challenges for project-based companies include:
- Understanding your cost structures to determine the right margin
- Lack of standard project templates for typical services, including timelines
- Ability to obtain the right resources and equipment for the job in a timely manner
- Ensure the project and supply chain collaborate and share real-time data
So how can companies improve project margins in the energy sector?
Make the whole experience structured and ready for the next change
While much of the work and equipment in a project-based company is repeatable, many companies fail to create templates and catalogs of repeatable project items.
To better learn and standardize incoming demand and avoid unnecessary customization, project-based service companies should create templates of standard project types for each deliverable set, especially for high-volume projects. A set of standard project template guides for each project type may include initial estimation effort, competency mix, equipment, remote support, and other key issues.
This type of continuous standardization work will allow for significant learning and will also reduce response time over time. This will give planners a much better overview of project demand, and resource planning techniques can be applied to optimize internal workforce and reduce temporary subcontractor requirements. By recording real progress and efficiency, resource management can truly provide a competitive advantage for such service companies.
A much smoother digital transformation Journey
The right ERP for your industry should be the cornerstone of your digitalization journey. Product features and pricing will always be important, but with the explosion of digital commerce they are quickly becoming commodities that companies compete against, but are not what sets a brand apart in the customer’s mind.
So what will it take? The answer is simple but elusive: Standing out is about securing customer loyalty and improving repeat business. We call it the Moment of Service. The moment when everything going on in your business life comes together. When hundreds of decisions, thousands of processes and people are shaped to present your company in the best way, it will provide great comfort in your projects.
Source: Magne Halvorsen
Global Industry Director for Oil and Gas at IFS
Date: 30 September 2021
